Microsoft Corporation

10/28/2026 | Press release | Distributed by Public on 10/28/2026 14:01

Earnings Release FY27 Q1

Microsoft Announces First Quarter Results

REDMOND, Wash. - October 28, 2026 - Microsoft Corp. today announced the following results for the quarter ended September 30, 2026, as compared to the corresponding period of last fiscal year:

· Revenue was $92.3 billion and increased 19%

· Operating income was $45.9 billion and increased 21% (up 22% in constant currency)

· Net income was $36.6 billion and increased 32% on a GAAP basis, and was $36.4 billion and increased 18% (up 19% in constant currency) on a non-GAAP basis

· Diluted earnings per share was $4.92 and increased 32% on a GAAP basis, and was $4.89 and increased 18% (up 19% in constant currency) on a non-GAAP basis

· Non-GAAP results exclude the impact from investments in OpenAI, explained in the Non-GAAP Definition section below

"We are delivering greater capability, choice, control, and cost efficiency for customers across our entire stack," said Satya Nadella, chairman and chief executive officer of Microsoft. "By helping organizations build and own their own intelligence, and earning trust through agent safety and security, we are translating our innovation into growing adoption and real-world impact across every industry."

"We delivered a strong start to the fiscal year with Microsoft Cloud revenue of $63.9 billion, with growth accelerating to 30% (up 31% in constant currency) year-over-year," said Amy Hood, executive vice president and chief financial officer of Microsoft. "Results exceeded expectations across revenue, operating income, and earnings per share."

The following table adjusts for the impact from investments in OpenAI and reconciles our financial results reported in accordance with generally accepted accounting principles (GAAP) to non-GAAP financial results. Additional information regarding our non-GAAP definition is provided below. All growth comparisons relate to the corresponding period in the last fiscal year.

Three Months Ended September 30,

2026

2025

Percentage Change Y/Y

Percentage Change Y/Y

($ in millions, except per share amounts)

As
Reported

(GAAP)

Impact from OpenAI*

As
Adjusted

(non-GAAP)

As
Reported

(GAAP)

Impact from OpenAI*

As
Adjusted

(non-GAAP)

GAAP

Constant Currency

Net Impact from OpenAI*

Non-GAAP

Non-GAAP Constant Currency

Net
income

$36,629

$(207)

$36,422

$27,747

$3,086

$30,833

32%

33%

$(3,293)

18%

19%

Diluted
earnings
per share

$4.92

$(0.03)

$4.89

$3.72

$0.41

$4.13

32%

33%

$(0.44)

18%

19%

*Impact from OpenAI adjusts for the impact from investments in OpenAI

Business Highlights

Revenue in Agents and Infra was $76.8 billion and increased 25%, with the following business highlights:

· Commercial remaining performance obligation increased 73% to $677 billion

· Microsoft Cloud revenue was $63.9 billion and increased 30% (up 31% in constant currency)

· Azure revenue increased 48%

· Microsoft 365 commercial cloud revenue increased 18% (up 19% in constant currency) on an adjusted basis, normalized for a 1-point benefit from in-period revenue recognition in the prior year, and increased 17% (up 18% in constant currency) on a reported basis

· Microsoft 365 consumer cloud revenue increased 17% (up 16% in constant currency)

· Industry solutions cloud revenue increased 10%

Revenue in Devices and Consumer was $15.5 billion and decreased 3%, with the following business highlights:

· Search and advertising revenue excluding traffic acquisition costs increased 12%

· XBOX content and services revenue decreased 2% (down 1% in constant currency)

· Windows OEM and Devices revenue decreased 22%

Microsoft returned $10.2 billion to shareholders in the form of dividends and share repurchases in the first quarter of fiscal year 2027.

Business Outlook

Microsoft will provide forward-looking guidance in connection with this quarterly earnings announcement on its earnings conference call and webcast.

Quarterly Highlights, Product Releases, and Customer Stories

Every quarter Microsoft delivers hundreds of products, services, and enhancements. These releases are driven by years of significant research and development investments, to empower customers with greater productivity, security, and differentiated value.

This momentum is reflected in stories that showcase how our technology is shaping industries and driving customer success. We share innovation updates on our product blogs across Azure, Microsoft 365, and more on our Official Microsoft blog.

Webcast Details

Satya Nadella, chairman and chief executive officer, Amy Hood, executive vice president and chief financial officer, Alice Jolla, chief accounting officer, Brian DeFoe, deputy general counsel and corporate secretary, and Jonathan Neilson, vice president of investor relations, will host a conference call and webcast at 2:30 p.m. Pacific time (5:30 p.m. Eastern time) today to discuss details of the company's performance for the quarter and certain forward-looking information. The session may be accessed at http://www.microsoft.com/en-us/investor. Participants can also dial into the conference call at (877) 407-0666 or +1 (201) 689-8023 for international, no password required. The webcast will be available for replay through the close of business on October 28, 2027.

Non-GAAP Definition

Impact from investments in OpenAI. In the first quarter of fiscal year 2027, net income and diluted earnings per share were impacted by net gains from investments in OpenAI, which resulted in an increase in net income and diluted earnings per share of $207 million and $0.03, respectively. In the first quarter of fiscal year 2026, net income and diluted earnings per share were impacted by net losses from investments in OpenAI, which resulted in a decrease in net income and diluted earnings per share of $3.1 billion and $0.41, respectively.

Microsoft has provided non-GAAP financial measures related to the impact from investments in OpenAI to aid investors in better understanding our performance. Microsoft believes these non-GAAP measures assist investors by providing additional insight into its operational performance and help clarify trends affecting its business. For comparability of reporting, management considers non-GAAP measures in conjunction with GAAP financial results in evaluating business performance. The non-GAAP financial measures presented in this release should not be considered as a substitute for, or superior to, the measures of financial performance prepared in accordance with GAAP.

Constant Currency

Microsoft presents constant currency information to provide a framework for assessing how our underlying businesses performed excluding the effect of foreign currency rate fluctuations. To present this information, current and comparative prior period results for entities reporting in currencies other than United States dollars are converted into United States dollars using the average exchange rates from the comparative period rather than the actual exchange rates in effect during the respective periods. All growth comparisons relate to the corresponding period in the last fiscal year. Microsoft has provided this non-GAAP financial information to aid investors in better understanding our performance. The non-GAAP financial measures presented in this release should not be considered as a substitute for, or superior to, the measures of financial performance prepared in accordance with GAAP.

Financial Performance Constant Currency Reconciliation

Three Months Ended September 30,

($ in millions, except per share amounts)

2026

2025

Percentage Change Y/Y

Percentage Change Y/Y

As Reported

(GAAP)

As Adjusted

(non-GAAP)

As Reported

(GAAP)

As Adjusted

(non-GAAP)

GAAP

Non-
GAAP

Constant Currency Impact

Constant Currency

Non-GAAP Constant
Currency

Revenue

$92,279

-

$77,673

-

19%

-

$(309)

19%

-

Operating
income

$45,915

-

$37,961

-

21%

-

$(297)

22%

-

Net income

$36,629

$36,422

$27,747

$30,833

32%

18%

$(242)

33%

19%

Diluted
earnings
per share

$4.92

$4.89

$3.72

$4.13

32%

18%

$(0.03)

33%

19%

Segment Revenue Constant Currency Reconciliation

Three Months Ended September 30,

($ in millions)

2026

2025

Percentage Change Y/Y

Constant Currency Impact

Percentage Change Y/Y

As Reported

(GAAP)


As Reported

(GAAP)

GAAP

Constant Currency

Agents and Infra

$76,795

$61,672

25%

$(290)

25%

Devices and Consumer

$15,484

$16,001

(3)%

$(19)

(3)%

We have recast certain prior period amounts to conform to the way we internally manage and monitor our business, which reflects the fiscal year 2027 changes to our segments announced in September 2026.

Selected Product and Service Information Constant Currency Reconciliation

Three Months Ended September 30, 2026

Percentage Change Y/Y (GAAP)

Constant Currency Impact

Percentage Change Y/Y Constant Currency

Commercial remaining performance obligation

73%

0%

73%

Microsoft Cloud revenue

30%

1%

31%

Azure revenue

48%

0%

48%

Microsoft 365commercial cloud revenue

17%

1%

18%

Microsoft 365consumer cloud revenue

17%

(1)%

16%

Industry solutions cloud revenue

10%

0%

10%

Search and advertising revenue excluding traffic acquisition costs

12%

0%

12%

XBOX content and services revenue

(2)%

1%

(1)%

Windows OEM and devices revenue

(22)%

0%

(22)%

About Microsoft

Microsoft (Nasdaq "MSFT" @microsoft) creates platforms and tools powered by AI to deliver innovative solutions that meet the evolving needs of our customers. The technology company is committed to making AI available broadly and doing so responsibly, with a mission to empower every person and every organization on the planet to achieve more.

Forward-Looking Statements

Statements in this release that are "forward-looking statements" are based on current expectations and assumptions that are subject to risks and uncertainties. Actual results could differ materially because of factors such as:

· intense competition in all of our markets that could adversely affect our results of operations;

· substantial investments in cloud and AI strategy that depend on customer demand, technological developments, competitive dynamics, and regulatory condition;

· development, delivery, and maintenance of competitive cloud-based and AI products and services that achieve broad customer adoption and sustainable revenue growth;

· significant investments in products and services that may not achieve expected returns;

· acquisitions, joint ventures, and strategic alliances that could have an adverse effect on our business;

· cyberattacks and security vulnerabilities that could lead to reduced revenue, increased costs, liability claims, or harm to our reputation or competitive position;

· disclosure and misuse of personal data that could cause liability and harm to our reputation;

· the possibility that we may not be able to protect information in our products and services from use by others;

· abuse of our platforms that may harm our reputation or user engagement;

· products and services, how they are used by customers, and how third-party products and services interact with them, presenting security, privacy, and execution risks;

· issues about the development, deployment, and use of AI that may result in reputational or competitive harm, or liability;

· inability to develop and expand adequate infrastructure;

· supply or other quality problems;

· excessive outages, disruptions, or capacity constraints of our services if we fail to maintain an adequate operations infrastructure or secure resources necessary to support it;

· potential consequences of new, existing, and evolving legal and regulatory requirements;

· claims against us that could result in adverse outcomes in legal disputes;

· uncertainties relating to our business with government customers;

· additional tax liabilities;

· an inability to protect and utilize our intellectual property may harm our business and operating results;

· claims that Microsoft has infringed the intellectual property rights of others;

· damage to our reputation or our brands that may harm our business and results of operations;

· adverse economic or market conditions that could harm our business;

· catastrophic events or geopolitical conditions that could disrupt our business;

· exposure to increased economic and operational uncertainties from operating a global business, including the effects of foreign currency exchange; and

· the dependence of our business on our ability to attract and retain talented employees.

For more information about risks and uncertainties associated with Microsoft's business, please refer to the "Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Risk Factors" sections of Microsoft's SEC filings, including, but not limited to, its annual report on Form 10-K and quarterly reports on Form 10-Q, copies of which may be obtained by contacting Microsoft's Investor Relations department at (800) 285-7772 or at Microsoft's Investor Relations website at http://www.microsoft.com/en-us/investor.

All information in this release is as of September 30, 2026. The company undertakes no duty to update any forward-looking statement to conform the statement to actual results or changes in the company's expectations.

For more information, press only:

Microsoft Media Relations, WE Communications for Microsoft, (425) 638-7777, [email protected]

For more information, financial analysts and investors only:

Jonathan Neilson, Vice President, Investor Relations, (425) 706-4400

Note to editors: For more information, news and perspectives from Microsoft, please visit the Microsoft News Center at http://www.microsoft.com/news. Web links, telephone numbers, and titles were correct at time of publication, but may since have changed. Shareholder and financial information, as well as today's 2:30 p.m. Pacific time conference call with investors and analysts, is available at http://www.microsoft.com/en-us/investor.

MICROSOFT CORPORATION

INCOME STATEMENTS

(In millions, except per share amounts) (Unaudited)

Three Months Ended

September 30,

2026

2025

Revenue:

Product

$14,631

$15,922

Service and other

77,648

61,751

Total revenue

92,279

77,673

Cost of revenue:

Product

2,471

2,922

Service and other

27,249

21,121

Total cost of revenue

29,720

24,043

Gross margin

62,559

53,630

Research and development

9,047

8,146

Sales and marketing

5,716

5,717

General and administrative

1,881

1,806

Operating income

45,915

37,961

Other income (expense), net

38

(3,660)

Income before income taxes

45,953

34,301

Provision for income taxes

9,324

6,554

Net income

$36,629

$27,747

Earnings per share:

Basic

$4.93

$3.73

Diluted

$4.92

$3.72

Weighted average shares outstanding:

Basic

7,426

7,433

Diluted

7,446

7,466


COMPREHENSIVE INCOME STATEMENTS

(In millions) (Unaudited)

Three Months Ended

September 30,

2026

2025

Net income

$36,629

$27,747

Other comprehensive income (loss), net of tax:

Net change related to derivatives

3

(3)

Net change related to investments

(559)

687

Translation adjustments and other

(17)

(98)

Other comprehensive income (loss)

(573)

586

Comprehensive income

$36,056

$28,333


BALANCE SHEETS

(In millions) (Unaudited)

September 30,

2026

June 30,

2026

Assets

Current assets:

Cash and cash equivalents

$20,281

$20,935

Short-term investments

44,228

55,908

Total cash, cash equivalents, and short-term investments

64,509

76,843

Accounts receivable, net of allowance for doubtful accounts of $728 and $1,040

62,084

80,876

Inventories

1,835

1,397

Other current assets

57,709

48,594

Total current assets

186,137

207,710

Property and equipment, net of accumulated depreciation of $127,208 and $118,691

346,844

313,076

Operating lease right-of-use assets

30,178

24,177

Equity and other investments

37,808

36,348

Goodwill

119,646

119,651

Intangible assets, net

17,751

18,609

Other long-term assets

41,039

38,805

Total assets

$779,403

$758,376

Liabilities and stockholders' equity

Current liabilities:

Accounts payable

$42,625

$42,416

Current portion of long-term debt

4,391

9,227

Accrued compensation

10,156

14,945

Short-term income taxes

1,447

2,534

Short-term unearned revenue

66,866

72,965

Other current liabilities

26,483

26,738

Total current liabilities

151,968

168,825

Long-term debt

31,090

31,067

Long-term income taxes

29,235

28,647

Long-term unearned revenue

2,697

2,747

Deferred income taxes

3,174

3,054

Operating lease liabilities

21,719

16,532

Other long-term liabilities

69,011

65,117

Total liabilities

308,894

315,989

Commitments and contingencies

Stockholders' equity:

Common stock and paid-in capital - shares authorized 24,000; outstanding 7,427 and 7,427

119,571

117,406

Retained earnings

354,795

328,265

Accumulated other comprehensive loss

(3,857)

(3,284)

Total stockholders' equity

470,509

442,387

Total liabilities and stockholders' equity

$779,403

$758,376




CASH FLOWS STATEMENTS

(In millions) (Unaudited)

Three Months Ended

September 30,

2026

2025

Operations

Net income

$36,629

$27,747

Adjustments to reconcile net income to net cash from operations:

Depreciation, amortization, and other

11,744

8,147

Stock-based compensation expense

3,134

2,983

Net recognized losses (gains) on investments and derivatives

(231)

3,907

Deferred income taxes

4,609

2,491

Changes in operating assets and liabilities:

Accounts receivable

17,104

16,490

Inventories

(436)

(192)

Other current assets

(1,903)

(1,162)

Other long-term assets

(6,389)

(394)

Accounts payable

525

(614)

Unearned revenue

(5,942)

(5,418)

Income taxes

(556)

(2,944)

Other current liabilities

(4,528)

(5,507)

Other long-term liabilities

4,240

(477)

Net cash from operations

58,000

45,057

Financing

Repayments of debt

(4,850)

0

Common stock issued

598

689

Common stock repurchased

(4,379)

(5,650)

Common stock cash dividends paid

(6,757)

(6,169)

Other, net

(1,252)

(669)

Net cash used in financing

(16,640)

(11,799)

Investing

Additions to property and equipment

(39,367)

(19,394)

Acquisition of companies, net of cash acquired and divestitures, and purchases of intangible and other assets

(397)

(578)

Purchases of investments

(5,394)

(17,671)

Maturities of investments

5,672

6,031

Sales of investments

10,470

3,262

Other, net

(12,949)

(6,209)

Net cash used in investing

(41,965)

(34,559)

Effect of foreign exchange rates on cash and cash equivalents

(49)

(92)

Net change in cash and cash equivalents

(654)

(1,393)

Cash and cash equivalents, beginning of period

20,935

30,242

Cash and cash equivalents, end of period

$20,281

$28,849

We have recast certain prior period amounts to conform to the current period presentation.

SEGMENT RESULTS

(In millions) (Unaudited)

Three Months Ended

September 30,

2026

2025

Agents and Infra

Revenue

$76,795

$61,672

Cost of revenue

23,887

17,701

Operating expenses

12,350

11,253

Operating income

$40,558

$32,718

Devices and Consumer

Revenue

$15,484

$16,001

Cost of revenue

5,833

6,342

Operating expenses

4,294

4,416

Operating income

$5,357

$5,243

Total

Revenue

$92,279

$77,673

Cost of revenue

29,720

24,043

Operating expenses

16,644

15,669

Operating income

$45,915

$37,961

We have recast certain prior period amounts to conform to the way we internally manage and monitor our business, which reflects the fiscal year 2027 changes to our segments announced in September 2026.


PRODUCT AND SERVICE OFFERINGS REVENUE

(In millions) (Unaudited)

Three Months Ended

September 30,

2026

2025

Azure

$33,165

$22,384

Microsoft 365 cloud

27,778

23,694

Productivity and server licensing

8,407

8,678

Search and advertising

6,554

5,942

XBOX

5,379

5,508

Industry solutions

5,337

4,894

Windows OEM and devices

3,551

4,551

Frontier and support services

2,108

2,022

Total revenue

$92,279

$77,673

We have recast certain prior period amounts to conform to the way we internally manage and monitor our business, which reflects the fiscal year 2027 changes to our segments announced in September 2026.

IMPORTANT NOTICE TO USERS (summary only, click here for full text of notice); All information is unaudited unless otherwise noted or accompanied by an audit opinion and is subject to the more comprehensive information contained in our SEC reports and filings. We do not endorse third-party information. All information speaks as of the last fiscal quarter or year for which we have filed a Form 10-K or 10-Q, or for historical information the date or period expressly indicated in or with such information. We undertake no duty to update the information. Forward-looking statements are subject to risks and uncertainties described in our Forms 10-Q and 10-K.
Microsoft Corporation published this content on October 28, 2026, and is solely responsible for the information contained herein. Distributed via Public Technologies (PUBT), unedited and unaltered, on October 28, 2026 at 20:01 UTC. If you believe the information included in the content is inaccurate or outdated and requires editing or removal, please contact us at [email protected]